General Motors Bankruptcy

As a concerned American citizen I wonder what the course of action our current administration is taking foreshadows in relation to their handling of similar situations in the near future. I hear the news that our federal government will hold 70% of ownership and wonder how they will be able to keep a truly "hands-off" approach when they are hand-picking the board of directors for the post-Chapter 11 General Motors. I am not one of those paranoid conservatives spouting off with that oh-so-clever play on abbreviations (Government Motors), and I don't think the government is moving us towards socialism at the fastest pace tolerable to the American public, but what I do see is a radical change in the way our economy works. You can't give one company $30 billion one day and tell the next struggling company "Tough-luck, it's a free market!". President Obama promised unprecedented transparency but for all the explanations of what his administration is doing, I find myself more and more confused as to the why.

I really can't see how you can begin to argue that Obama's administration isn't moving us towards socialism in the fastest way. He already owns two of the three pillars needed to make it happen. i.e Banking Industry, Automotive Industry, and soon health care industry.

I can't say that for a fact socialism is the ultimate goal of Obama's administration. I am not a fan of his policies, and I didn't vote him into office, but I won't make the claim when it's not something anyone besides him really knows the answer to. If that is his motive then I think it should become clearer in time, and I sincerely doubt that Americans will welcome the idea. I believe that they will most definitely put a stop to it should it become an undeniable goal of his or the Democratic party. Saying that, I don't think Republicans, conservatives, or even independents help their respective causes by alienating those individuals who see it as fear-mongering.

http://correspondents.theatlantic.co...looks_like.php

http://correspondents.theatlantic.co...sm%20chart.png

ahem... bused..


hehe, i really ddin't want this to sound like a flame.. and it still isn't. that post was just so neat. :)

Thanks Malacasta! That actually puts into perspective how erroneous the idea that the US Government is taking over our nation's economy. I hear from many of my extremely conservative co-workers how we are only a few steps away from socialist police state and I can't rationalize that thinking.

You don't need to take over the entire private industry. You just need to take over the 3 key industries to control the rest. Again, those key Industries are Banking, Automotive, and Health care. You control these then you effectively control (heavily influence) the rest, and the wheels of socialism effectively on the road.

Malacasta's chart doesn't tell the complete story.

By what standard are those 3 the keys to taking over the entire private industry? I am not arguing, I am genuinely wondering what thinking is behind that and who came up with that standard for industry. Truthfully I am not educated extensively in economics. I can handle individual investment but I am not an expert on the driving forces of the entire industry. So if controlling banking, healthcare, and the auto industry means you control everything else (kind of like owning Boardwalk AND Park Place) where is the economic theory behind this?

Afterthought: Oh and how has the goverment taken over all these industries, it is my understanding that the government has to sell back it's shares in companies it effectively owns, and that TARP money can be repaid as soon as a bank is profitable and able to demonstrate an ability to conduct business responsibly.

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Originally posted by Kailen
You don't need to take over the entire private industry. You just need to take over the 3 key industries to control the rest. Again, those key Industries are Banking, Automotive, and Health care. You control these then you effectively control (heavily influence) the rest, and the wheels of socialism effectively on the road.

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This is an assertion. Who is saying it, and why are they saying it? What are the arguments to back the points up? An assertion isn't an argument no matter how loud the voices are in the echo chamber. Did you read the article I linked to, if you did, why didn't you comment on the point he was making about degrees?

Furthermore, I don't understand what this 'socialism' is you are talking about. Is it the same as say 'democratic socialism' in Sweden, or is it more like 'North Korean socialism', maybe it's like 'Canadian Socialism' or 'Australian Socialism'? Using a word to describe something when you have not even explained what that word means (and it could mean any number of things) isn't the way to win an argument.

Don't get me wrong, you might have a really good point and I might even agree with it. I just don't know what it is and I have no idea what I'd be agreeing to.

EDIT: Sorry, this is basically a repeat of Achtius' post.

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Originally posted by Achtius
Afterthought: Oh and how has the goverment taken over all these industries, it is my understanding that the government has to sell back it's shares in companies it effectively owns, and that TARP money can be repaid as soon as a bank is profitable and able to demonstrate an ability to conduct business responsibly.

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Yeah. You give a company some money and say "Oh, and you should be repaying this as soon as you can". Reckon it's going to be paid back any time soon? I don't.

Unless there's something in the contract that requires it to be paid back across so-many years, or something, it won't be. If it's just "when the bank becomes profitable", then it's open to abuses involving the definition of profit and still won't be paid back in the near future. And quite possibly the money won't _ever_ be paid back. Definitely won't be if the banks don't get chased for it - who ever heard of a bank voluntarily giving up money?

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Yeah. You give a company some money and say "Oh, and you should be repaying this as soon as you can". Reckon it's going to be paid back any time soon? I don't.

Unless there's something in the contract that requires it to be paid back across so-many years, or something, it won't be. If it's just "when the bank becomes profitable", then it's open to abuses involving the definition of profit and still won't be paid back in the near future. And quite possibly the money won't _ever_ be paid back. Definitely won't be if the banks don't get chased for it - who ever heard of a bank voluntarily giving up money?

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May 29, 2009 by admin ·

Two more banks have redeemed the shares they sold the government in exchange for bailout funding.

First Niagara Financial Group Inc., of Lockport, N.Y., said it repaid the $184 million it received seven months ago. BailoutSleuth reported previously on its plan to exit the bailout the program.
First Manitowoc Bancorp Inc., a Wisconsin-based company, said it had paid the Treasury $12.6 million to redeem the shares it issued in January. It also paid $21,800 in accrued dividends.
First Niagara’s chief executive, John P. Koelmel, said the taxpayer capital that the bank received through the Treasury Department’s Troubled Asset Relief Program had served its purpose.
“Our first quarter loan production increased by 8 percent over the same period a year ago as we continued to leverage the federal capital to make commercial and consumer credit readily available in the communities where we do business,” he said in a prepared statement. “When market conditions improved, we replaced the government’s investment with private capital”
First Niagara raised $380.4 million through a stock offering last month.

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http://www.bearmarketinvestments.com/tag/tarp

Again Malacasta, your example is misleading. That Bank does not represent the Merril Lynch, Bank of America's, AIG. These banks are juggernauts compared to the mom and pop one that you cited.

Many of the banks tried to give the bailout money back, but the government refused.

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Originally posted by Kailen
Many of the banks tried to give the bailout money back, but the government refused.

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You got to cite a source for that. This would be the first I heard.



In the end, honestly what's wrong with socialism? I live in an incredibly socialist province in a socialist country.. and in all of North America we are one of the most stable, most rock solid, during this time of recession. Honestly, when it comes to those afraid of socialism all I have to say is : seriously, don't knock it til you've tried it.

Omitting the Auto-industry (I am having a hard time understanding how that particular industry being owned by the government is one of THREE steps toward "socialism" in the first place), and banking industry (which I can understand completely) this article just popped up regarding an aspect of our healthcare system that I thought was rather interesting and relevant. It is, however, skewed toward the single-payer mentality and I haven't been able to find the actual study, only this article.

http://tinyurl.com/pulmjn/

It begins:

WASHINGTON (Reuters) - Medical bills are behind more than 60 percent of U.S. personal bankruptcies, U.S. researchers reported on Thursday in a report they said demonstrates that healthcare reform is on the wrong track.

More than 75 percent of these bankrupt families had health insurance but still were overwhelmed by their medical debts, the team at Harvard Law School, Harvard Medical School and Ohio University reported in the American Journal of Medicine.

I've never experienced a socialist healthcare system but if these stats are true...i'd have to agree with Pae.

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Originally posted by Kailen
Again Malacasta, your example is misleading. That Bank does not represent the Merril Lynch, Bank of America's, AIG. These banks are juggernauts compared to the mom and pop one that you cited.

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Kailen, Rosuav made a statement that no banks would give the money back. I demonstrated two examples of banks giving the money bank. My post quoted Rosuav's so it was pretty clear (I would have thought) that I was answering Rosuav and not you.

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Many of the banks tried to give the bailout money back, but the government refused.

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Well, this assertion completely contradicts Rosuav's assertion, so there you go eh? But to the point, my understanding is that the government is requesting the banks meet the mutually agreed requirements for repayment. I've read articles on this. Google is your friend.

http://online.wsj.com/article/BT-CO-...21-711781.html


This is the article for the Government's refusal of taking the TARP funds back from the banks. I don't have the password to access the full article at home.

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Originally posted by Pae

In the end, honestly what's wrong with socialism? I live in an incredibly socialist province in a socialist country.. and in all of North America we are one of the most stable, most rock solid, during this time of recession. Honestly, when it comes to those afraid of socialism all I have to say is : seriously, don't knock it til you've tried it.

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Everyone has health care sure! Unfortunately, the time and quality of the health care is atrocious. Long waits to see specialist, and you have some bureaucrat dictating to your Doctor what type of treatment you receive, versus having multiple options. If Canadian Healthcare was so great, many of it's citizens wouldn't carry a separate policy in America. Also, you wouldn't have so many Canadians daily traversing the borders for jobs with American company's for benefits.

Lastly, Economies in socialist country's see almost flat growth. Nothing of that in a Capitalist market. Growth equates to jobs, opportunities, and monies!

I am not a subscriber to WSJ online, so I couldn’t read your link.

A google news search on 'Geithner TARP' threw out a lot of articles and many of those suggest that Geithner needs to be clear and reasonable about repayment terms which would indicate that currently, it’s all a bit messy.
This article mentions that JP Morgan, Goldman Sachs and Morgan Stanley have all applied to repay TARP but that “The banks must prove that they have enough capital to keep lending. Regulators will also consider the question of whether the financial system as a whole can supply the credit needed to ensure an economic recovery.”. Which is, perhaps, similar to what the WSJ online might have discussed.

In all honesty, Kailen, I don’t know what to make of it. Even if I were an economist I would probably be confused, I haven’t seen any consensus from that sector about how best to deal with this GFC. From the articles I’ve read on Geithner, I haven’t seen anything that would suggest that this administration wants to completely nationalize the banking sector, I can’t even see from these articles, any suggestion that Geithner wants to hold onto the bank stocks for any longer than he feels is necessary to keep the markets improving or stabilizing. You disagree, but only time will tell.

The American Prospect has this to say about Socialism and AIG and GM. I’ve quoted it in full because I believe it speaks to what Kailen is asserting.

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ON SOCIALISM.
Jon Henke highlights a few people wondering” why everybody is afraid to use the S-word" to describe the government's investment in General Motors. The easy joke is, doye, Saul Anuzis already decided that socialism was played and conservatives have to call Obama’s policies "fascist."
But Henke doesn't roll that way, so here's a real answer. It's fair to call the General Motors deal or the AIG takeover examples of socialist policy; government is directly intervening in a private concern. But it's not fair to say that the Obama administration is socialist per se because socialism is an -ism, a system, a guiding philosophy, and it's clear that putting the government in charge of private production is not the Obama administration's guiding philosophy. When some conservatives try to insist otherwise, that's when they look over the top. Maybe there's a point when these socialist policies add up to actual socialism (or in the banking system, lemon socialism) but we are far, far from it.

If the Obama administration had come into office without an economic emergency, they wouldn't be involved in these firms -- don't forget that the first big government takeovers came under George W. Bush and that the management and directors of the auto companies asked for government help. The current administration has made clear they don't intend to be in the auto making (or banking) business for very long, and voluntarily laid out various guidelines to keep politics out of business decisions. Obviously, lines will be fudged and there are plenty of opportunities for conflict, but this is clearly not an administration whose every answer is "seize the means of production" -- see, for instance, this graph, or the administration's deep reluctance to take over insolvent banks despite a fairly large constituency for such an action. Ultimately, then, I'm not sure it's productive for conservatives to call the administration's response to the auto makers "socialism" -- although, hey, maybe some political points in that -- but rather to harp on the fact that the government has made a pretty unfortunate investment because it thought the collapse of the industry presented a systemic risk to the economy.

More broadly, though, as Henke recognizes, one of the reasons the "s-word" has become somewhat meaningless is that it is used by some conservatives to describe things that just aren't socialism at all, like regulations or the income tax, rather than recognizing our hybrid economic system and debating within its framework. We can argue over whether more or less regulation is a good thing and what the appropriate income tax rates ought to be, but neither one represents a socialist policy. Another reason that this socialism debate hasn't taken off is that liberals aren't really in the business of defending socialism, so my response, at least, to the socialism debate is generally, "yup, that's not a normatively good idea, but strategy demands it." I would really have preferred to avoid a government takeover General Motors, but the consequences of not doing so seem catastrophic.

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Damn, Malacasta beat me to the GDP growth rebuttal. I was even pulling my numbers from the CIA world handbook to be sure! :(

I guess I'll just have to point out the ridiculousness of the "some bureaucrat dictating to your doctor what type of treatment you receive" routine.

Canadian bureaucrats can no more do this than American insurance companies do. What both can do is refuse to fund a treatment. You seem to be suggesting that if you need a treatment that your insurance company won't pay for, you can shop for another insurance company that will. I find this EXTREMELY unlikely. Private insurance companies are notorious for rejecting anybody that they think -might- need treatment down the road. They will almost certainly reject anybody they -know- will need treatment right away. The Canadian government doesn't reject anybody, no matter what their medical history or current medical condition.

Now, some would rather have a private company making these decisions than the Government. It's an issue of deciding who you can trust more. The way I see it, the Canadian government has a mandate to serve the Canadian people. A private insurance company has a mandate to make as much money as possible, just like any other business. To me, that's an easy choice. Now, if I had to choose between the American government and a private insurance company, it would be a MUCH harder decision and I understand why many Americans fear/hate the idea.

In Australia, you can also take out private health insurance above and beyond our socialised health (Medicare) system.

Don't trust those dodgy first year MD's or those bureaucrats telling them what to do, use the private health option!

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Originally posted by Kailen
If Canadian Healthcare was so great, many of it's citizens would carry a separate policy in America. Also, you wouldn't have so many Canadians daily traversing the borders for jobs with American company's for benefits.

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This is a gross misrepresentation. I will fully and wholeheartedly admit that yes, there are at times wait times for things. In fact right now I have a fully torn ACL and it took me 3 months to get an MRI, 2 months to get to meet a surgeon, and will take another 2 to get into surgery. If I was in the US, I could bypass all that wait time.. however at what cost?

See, there's no place in the US that I could work in my industry and receive adequate healthcare without going into major debt.

However, when things are urgent/life threatening.. there's no hesitation whatsoever in our system. You get in, you get fixed.

There was this time when I was a university student. I had a problem with my digestive system that my intestines got clogged. I had no idea what was going on, all I knew is that I was in a ton of pain.

I was also at the time living on credit/loans.

I went to the hospital, I had my stomach pumped, given an IV, was diagnosed and fixed up in a couple of days.

I walked out fine and healed.

If I was in the US... I would owe thousands of dollars. I love the US, I think it's a wonderful country with many pros. Their lack of healthcare in my mind is a HUGE con. Once again Kailen, don't knock it, til you've tried it.



I would NEVER trade this system for the world. And there are MILLIONS more Canadians who agree with me. Your representation of Canadians fleeing the socialism of Canada is so far from beyond the truth. If ANY government system even attempted to ditch our healthcare or privatize it nationwide... they would be thrown out by the vast majority LONG before they finished their sentence.

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Originally posted by leira
...the Canadian government has a mandate to serve the Canadian people. A private insurance company has a mandate to make as much money as possible, just like any other business. To me, that's an easy choice. Now, if I had to choose between the American government and a private insurance company, it would be a MUCH harder decision and I understand why many Americans fear/hate the idea.

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Wow, Leira. Thanks for putting words to my thoughts. Well said.

The thing I find amusing about Malacasta's first picture is the US gov has paid about $100 billion for AIG, ~$30 billion to date to auto companies, yet the US owns only ~$80 billion in assets, not to mention billions more for various other companies. I'm glad we thought this one through! Also, I wonder where Freddie and Fanny fit in that picture, while probably not considered gov owned companies, they might as well be and they have trillions in assets, I assume, but am too lazy to check.

If you don't privatise healthcare, you leave yourself vulnerable to THE COMMUNIST THREAT!!!

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Originally posted by Blog
Also, I wonder where Freddie and Fanny fit in that picture, while probably not considered gov owned companies, they might as well be and they have trillions in assets, I assume, but am too lazy to check.

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Were worth trillions....not any longer.

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Originally posted by Blog
The thing I find amusing about Malacasta's first picture is the US gov has paid about $100 billion for AIG, ~$30 billion to date to auto companies, yet the US owns only ~$80 billion in assets, not to mention billions more for various other companies. I'm glad we thought this one through! Also, I wonder where Freddie and Fanny fit in that picture, while probably not considered gov owned companies, they might as well be and they have trillions in assets, I assume, but am too lazy to check.

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I'm glad you found it amusing Blog, but I only linked it because Kailen was talking about the Obama administration moving us towards socialism in the fastest way. Since the Obama administration wasn't around for the AIG and Fanny Mae bailouts I don't see what relevance they have to Kailen's point.

As for what the government owns, well that has nothing to do with the graph. The graph doesn't say anything about how much the government owns. Why are you expecting the graph to talk about something it doesn't purport to comment on?

I'm having a bit of trouble understanding this thread. A claim is made and so people will answer that claim, a different claim is then made along with a taunt that when we answered the first claim we didn't answer the second (which had not been even asserted yet)

What would be nice is that if the people who believe that Obama is reforming the American political and economic scene into 'socialism' define what Socialism is, and explain exactly how his administration's actions are achieving that in a way that is markedly different from administrations before his.

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Originally posted by Malacasta
What would be nice is that if the people who believe that Obama is reforming the American political and economic scene into 'socialism' define what Socialism is, and explain exactly how his administration's actions are achieving that in a way that is markedly different from administrations before his.

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Isn't that how the US political system works though? Vague claims to evoke emotional support/condemnation?

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Originally posted by Malacasta
What socialism looks like:
http://correspondents.theatlantic.co...sm%20chart.png

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Note: Reposted with links only so that images can be removed from thread.